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The IPTV Transition: How will regulators and customers react to the impending changes?

Internet Protocol Television (IPTV) is a relatively new technology that promises to revolutionize the Television marketplace. Services like AT&T U-verse and Verizon FIOS promise to deliver television and Internet services to customers with increased access to Video-on-Demand (VOD) and increased Internet bandwidth. Unlike the recent digital TV transition initiated by the FCC and subject to several administrative orders and long-term delays,[i] transition to IPTV will be triggered by market factors. Most notably, customers’ preferences for VOD and the limitations of traditional cable will lead many to consider IPTV.

IPTV is, simply put, the process of “streaming” traditional TV channels and more modern VOD services over a single Internet connection instead of a co-axial cable connection.[ii] The main advantage of IPTV is cost savings caused by the ability to send only the channels and programs customers want to their television sets.[iii] Traditional cable TV broadcasts all channels to each customer at all times, which uses up a lot of the bandwidth available to technically inferior co-axial delivery service.[iv] IPTV only delivers content that customers currently want to TV sets, which saves energy by not broadcasting hundreds of channels to millions of customers all at the same time. Additionally, with VOD services and other “time shifting” services becoming more popular, IPTV offers customers the ability to dedicate more bandwidth to those specialty services.[v] The last advantage IPTV has is in connection with the companies that currently offer or will soon offer IPTV services – better Internet access. AT&T U-verse (which uses IPTV) and Verizon FIOS (which uses a hybrid system) deliver higher speed and larger bandwidth using fiber-optic cable connections then anything available through traditional copper wiring. In fact, companies have probably maxed out the bandwidth available from cable wiring and will need to transition to fiber to meet customer demand for more bandwidth.[vi] These companies are able to co-opt their better Internet services with IPTV services, which among other things, saves bandwidth allowing more to be dedicated to general Internet services and provides a better platform for VOD services.

Net Neutrality and Privacy

IPTV is not going away anytime soon, and will continue to grow as traditional cable becomes more and more archaic. There are, however, several legal implications of the expansion of IPTV. Firstly, Net Neutrality – which was recently passed with the FCC’s 2015 Open Internet Order[vii] – bans “throttling,” which is defined as “impairing or degrading lawful Internet traffic on the basis of content, application, service, or use of non-harmful device.”[viii] The problem is that, IPTV’s network structure essentially creates a fast lane for VOD content because VOD streams “must use dedicated bandwidth per subscriber.”[ix] Depending on a Court’s interpretation of “Throttling”, IPTV’s VOD services could violate Net Neutrality – giving rise to damage awards to private plaintiffs under section 206 and 207 of the Communications Act.[x]

Secondly, there are serious privacy implications with the proliferation of IPTV services. Because only some programming is sent to TV sets, IPTV gives providers the ability to use targeting advertising in ways simply not possible with traditional cable television services.[xi] Instead of advertising on a channel-by-channel basis, IPTV would allow neighborhood-by-neighborhood advertising. Additionally, tracking customers’ viewing habits is much easier – and much more similar to internet tracking that firms like Google use to provide targeting advertising services – then it was to track viewing behavior on traditional broadcast cable TV.

Regulators are currently unprepared for the challenges that IPTV will bring. The Net Neutrality Order – although it is unclear whether it will stand under the next Administration – was not written to effectively deal with IPTV. VOD services are extremely popular and any Administrative Order that gives inferior competitors the ability to sue over VOD services, is an Administrative Order that will have to change, either through Congressional Action or an FCC rulemaking procedure. Moreover, Internet privacy advocates and regulators (at both the FTC and the FCC) will have to start treating TV services like the Internet and be willing to nullify the adhesion contracts that will certainly follow IPTV services and their intrusive data collection.

[i] Carriage of the Transmissions of Digital Television Broadcast Stations, CS Docket No. 98-120, Notice of Proposed Rulemaking, 13 FCC Rcd 15092, 15093, paras. 1-2 (1998)(laying out the first plan for digital transition); Carriage of Digital Television Broadcast Signals: Amendment to Part 76 of the Commission’s Rule, CS Docket No. 98-120, Declaratory Order, 23 FCC Rcd 14254. para. 1(2008) (stating February 2007 as the final date of implementation for digital transition; Amendment of Parts 73 and 74 of the Commission’s Rules to Establish Rules for Digital Low Power Television and Television Translator Stations, MB Docket 03-185, Third Report and Order, 30 FCC Rcd 14927, paras. 1-2 (2015)(dealing with final issues relating to digital transition).

[ii] It is important to note that IPTV does not technically “stream” TV services the same way Internet TV (like YouTube or Hulu) does. For a better explanation see IPTV and Internet Video: Expanding the Reach of Television Broadcasting, Simpson and Greenfield, National Association of Broadcasters (2007).